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Prince Amir Al Saud

Apr 3 China Faces Growing Recession- Deep Analysis

China has the second largest economy and right now this country is counting days of misery with possible high risk financial crunch.

The recession in China must not affect the global economy severely but people will have to have the side effect due to such recession in Chinese market. South China Sea problem and interference in Hong Kong may be good reasons of damaging the GDP in China.

China Experiences a Slowdown in Recovery of Economy

Radio who heads Bridgewater hedge fund company, opines that China will run through a long lasting recession.

The biggest problem the government of China is to handle local debt.

Major Banks and big companies are regulated by Chinese government. These state run financial sectors have a target to complete in the case of approving bank loans to debtors. To be frank, number of bank loans starts going down after the sudden increase in the housing prices. Debtors are not showcasing interest to mortgage their real estate properties to have loans. The appreciation value of houses is running down.

To avoid recession, Chinese government is putting unprecedented pressure on private banks and money lending companies to increase the volume of bank loans. People who have houses to pledge for getting loans are backtracking after the declaration of new prices on houses.

Radio claims that China is experienced a slowdown in the collection of foreign currencies due to the considerable decrease in exporting products to other foreign countries.

Approximately $676 billion has already gone out of the country. It must bring more tragedies to domestic economy in China. However Radio predicts around 5% recession in China. Right now, this country is not facing unexpectedly severe financial breakdown but the situation can go out of hand in the matter of inordinate delay in making up the gap.

According to him, policy makers in China are always doing their good jobs by implementing more appreciable financial stimulus plans to reinforce the national economy of China.

The recovery of good economic condition is possible through the new stimulus programs.

Chinese government has already instructed major banks to approve more loans. The collected proceeds on interest’s rates plus principal amount will be spent to recover the health of economy in the country.

On the contrary, critics state that this unbelievable increase in the approval of secured loans to debtors will create chaos with pressure on these financial sectors uber. If debtors are not able to pay back the loan amount, money lending companies as well as banks will have bad time to pass through.

However, economists and policy makers in China claim that this provisional financial burden is manageable by modifying the interest rates and installment schemes for debtors to clear the outstanding balance.

China Should Prioritizes the Product Exporting Business

China has to expand the exporting business by selling more products in the global market. This Asian country should compete with other advanced European countries to improve the exporting business. Lot of national currencies is spent to import foreign goods. It hampers the GDP of China.

In addition, Hong Kong market is also building up a new challenge to China. Hong Kong is getting excess financial stimulus from foreign nations to boost up the stock and real estate industries. Well, Renminbi currency has been adjusted to cope with US dollar. International policy makers and economists request Chinese government to revalue the national currency through exchange rate realignment programs to enhance the good capital flow from outside to energize the economic infrastructure of China.

China’s Excessive Interference in Hong Kong Affects Economy of China

Diplomatic Relationship with Hong Kong needs serious improvement. Hong Kong should be treated as trading partner and not rivals.

After completion of all formalities to hand over legal authority over Hong Kong to Chinese government through a significant agreement between Britain and China, Hong Kong is now under a new government of mainland. However the hidden conflict between Hong Kong and the mainland is still powerful with long lasting effect to hamper economic growth of China.

Hong Kong people have vexation against the Chinese policy makers who directly regulate the administrative machinery of the government. “One country and two systems” agenda proposed by Hong Kong has not been properly taken care of present Chinese government.

Even after CEPA agreement to enhance the free trading between the mainland and Hong Kong, the situation is still bad. Resentment lies in the rigidity of new economic policies designed by China to modify conventional economy of Hong Kong.

The central government of the mainland tampers with local government of Hong Kong. Forceful interference and imposition of high taxes on various products exported from Hong Kong worsened the diplomatic rapport. It will bring more troubles for the mainland to export profitable products to occupied Hong Kong.

Household Consumption in China Is Low Comparing to US

In comparison to US, the household consumption share of China is at 35% whereas US reaches 70%.

So, more strategic economy is needed to steer clear of inflation. With the steady reduction of Chinese goods in rich countries, there is crisis faced by product manufacturing companies in China.

New policies and marketing strategies must be introduced to revive the domestic market to enhance flow of foreign currencies to enter into the country.

China Must Borrow Advanced Technology to Restore Economy

To reiterate, Chinese government must modify its business development policies. This country should borrow new technology and strategies to manufacture internationally standard products.

Similarly, with foreign stimulus, Chinese higher authority should prioritize the investment in the small scale industry to give the support to local traders.

More domestic companies must be brought under the stimulus for faster development. Growth oriented self-employed schemes will have to be launched to enable youngsters or budding entrepreneurs to improve their financial status.

Banks must provide flexible long term loans to businessmen to establish subsidiaries as a part of faster business expansion.

Data Management and Social Media

Diplomatic Relationship needs improvement

The mainland in Asia should accept new data management technology to secure confidential/classified data. This country has put severe restriction to share data with international countries.

Social media should be opened up with and allow free flow of information. It would educate people of China to integrate better with rest of the world and help in building new business and social relationships.

Conclusion

Government of China must be flexible in removing legal compulsions and intricacies to boost up other countries for good investment on domestic products in this country.

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Foreign Affairs Forum is a network of foreign affairs staffed by professional contributors from the worlds of journalism, academia, business, non-profits and think tanks, the FAF network tracks global developments on Great Decisions topics, daily.

The FAF network is a production of the publications, Founded in 2010 by group of GCC Diplomats and a group of concerned journalists and citizens, the Foreign Affairs Forum, serves as a catalyst for developing awareness, understanding of, and providing informed opinions on global issues.

All ideas and opinions expressed on the Foreign Affairs Forum and its affiliate networks are attributed solely to the author. The FAF Forum publications is one of the most prominent blog in middleeast and western nations with over 17 million followers.

Have a question about the FAF network? Contact our blog team at pr@faf.ae

Want to blog with us? Send your idea for a new blog, along with why you think it would make a great addition to the FAF network, two sample posts and a resume or CV to our Online Editor